Developers edge towards cladding deal with UK government

UK developers and housing secretary Michael Gove are nearing a deal that could resolve a large part of the building safety crisis highlighted by the 2017 fire at London's Grenfell Tower that killed 72 people.

Housebuilders and the government have been locked in talks since the start of the year, with Mr Gove pressing the sector to release more funds for fire remediation work on mid-rise blocks between 11 and 18m tall.

The housing department has estimated the costs of addressing safety issues on blocks of this height at £4 billion (€4.8 billion) and asked developers to pay, adding to an annual levy on the sector that will go towards the repair of buildings that are more than 18m tall.

UK housebuilder Crest Nicholson announced on Tuesday a big increase in the amount it has set aside to fix flats with fire safety problems – a sign that Mr Gove's tough stance is having some success.

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The FTSE 250 group said it would set aside between £80 million and £120 million for alterations to any of its mid-rise buildings that require fire safety work. This is substantially more than the £47.8 million it has paid out so far to tackle the issue.

Crest Nicolson is the first builder to announce it will sign up to the government's building safety pledge on fixing mid-rise blocks, and to put a figure on the forecast cost of remedial work.

Following Crest Nicolson's announcement, another UK builder Persimmon announced it had also signed the pledge. Persimmon said it would be able to remediate every mid-rise block with fire safety issues that it had built in the past 30 years without increasing its already announced provision of £75 million.

Other builders are expected to follow suit after Mr Gove gave the sector until the end of March to come up with a fully costed plan to remediate any buildings between 11 and 18m tall built within the past 30 years – a longer period than typical warranties extend for and than builders had anticipated.

Developers that do not sign up to the pledge will be locked out of government housing funds and the planning process, severely limiting their ability to operate.

Since he replaced Robert Jenrick in September, Mr Gove has increased the pressure on housebuilders to pay to resolve a crisis that has left tens of thousands of homeowners in properties with potential fire safety problems that are in effect unsaleable.

Developer Bellway indicated last week that its remediation costs could almost treble from the £187 million it had set aside.

Clyde Lewis, an analyst at Peel Hunt, said Crest Nicolson's announcement was a sign that the sector was coming closer to accounting for the crisis, but that costs would vary considerably between builders.

"It all depends on what they have built historically: it will come down to who has built lots of mid-rise blocks and who has not. Redrow and Persimmon have built very few; Barratt, Berkeley and Bellway have built a lot." – Copyright The Financial Times Limited 2022